Emerging markets will be key to growth

Thursday, June 26, 2008

Emerging economies will become a bigger slice of Procter & Gamble’s business in the next decade as it looks to ameliorate the effects of the US slowdown by tapping into the fast-growing markets of Brazil, Russia, India and China.

Bob McDonald, chief operating officer of P&G, said that the consumer goods company had built strong positions in Russia and China but was finding India, a stronghold of UK-based rival Unilever, a tougher nut to crack.

“India is important and growing well but we entered late,” said Mr McDonald. “Unilever was there as soon as the British empire colonised India, so they have been there for years . . . you just don’t want to run at a walled city because it can be expensive.”

P&G is now the biggest consumer goods company in China, with more than $2.5bn of annual sales. “It might surprise you that Russia is as important to us as China. There are fewer people, but there is high spend,” said Mr McDonald.

Developing markets will account for about 26 per cent of P&G’s sales by the end of the decade, against 20 per cent in 2000. “It is a relatively low percentage compared to Colgate and Unilever, who are both above 40 per cent in developing markets,” he said.

Back in the US, Mr McDonald declined to comment on perennial rumours that P&G is going to sell Duracell batteries, which it acquired as part of the Gillette deal in 2005, or its Pringles snacks business, which stands at odds with the rest of the group’s non-food lines. “All we have said is that we are more likely to be divestors than acquirers.”